UPDATE 1-U.S. insurers still expect cuts in 2015 Medicare payments

(Adds insurers' comments, share movement)

By Caroline Humer

April 8 U.S. health insurers said on Tuesday
they still expected cuts in government reimbursements for
privately managed Medicare health plans for the elderly next
year even after the Obama administration rolled back the
steepest reductions.

The government agency that oversees Medicare said late on
Monday that on average, reimbursements to insurers for private
Medicare plans would rise 0.4 percent, reversing what it said
was a proposed cut of 1.9 percent.

The insurance industry and advocates for the elderly had
lobbied against the cuts, which were first proposed in February,
saying they would reduce benefits for older people.

Republican and Democratic lawmakers had broadly opposed
further cuts as well, adding pressure on the administration at a
time when President Barack Obama's healthcare law was also under
attack.

After analyzing the final rate notice from the Centers for
Medicare and Medicaid Services (CMS) and comparing it with their
own models, health insurers said on Tuesday that the 2015
Medicare Advantage payment rates represented a cut to payments
from 2014 levels.

Humana Inc, which derives two-thirds of its revenue
from administering Medicare Advantage plans, said it expected a
funding decline of about 3 percent for 2015 plans from 2014,
according to a filing with the Securities and Exchange
Commission.

This is slightly better than Humana's initial forecast for a
drop of 3.5 percent to 4 percent in those rates, based on the
proposal issued on Feb. 21.

Aetna Inc, which also provides Medicare Advantage
plans, said it also anticipated a decline.

"Despite CMS's actions, Medicare Advantage plans will still
face rate decreases for 2015," Aetna spokeswoman Kendall
Marcocci said in a statement. The company is still evaluating
the impact, she added.

CMS officials were not immediately available for comment on
the insurers' or analysts' analyses.

The comments from individual insurers echoed that of
industry trade group America's Health Insurance Plans, which
said it was concerned about how the policy will affect the 15
million people who receive privately managed benefits. The
balance of the more than 50 million older and disabled people
who use Medicare are in a different program run by the
government.

"The changes CMS included in the final rate notice will help
mitigate the impact on seniors, but the Medicare Advantage
program is still facing a reduction in payment rates next year
on top of the 6 percent cut to payments in 2014," AHIP President
Karen Ignagni said in a statement.

Wall Street analysts saw an improvement of 2 to 3 percentage
points in the government's funding proposal, but they estimated
about a 3 percent cut overall, not an increase of 0.4 percent.

They described an apples-and-oranges comparison between how
they calculate the total impact of Medicare reimbursement rates
versus how the government does so.

One difference may be that the government analysis did not
reflect the 1 percent insurance tax that funds Obama's Patient
Protection and Affordable Care Act, while some analysts included
it.

Another factor, some said, is that CMS adjusted its
estimates to reflect the worsening health of some Medicare
members, while analysts did not.

Analyst Sheryl Skolnick of CRT Capital described the final
funding announcement as being "less worse" than anticipated.

"The market was assuming that the final rate would be better
than the proposal, and that's what it got," Skolnick wrote in a
note.

Each year, the government releases its formulas for
determining how it will reimburse the insurers for plan members'
procedures and doctor visits. Insurers use this information to
decide on the markets where they will offer plans and what
benefits they can provide.
(Reporting by Caroline Humer; Editing by Michele Gershberg,
Lisa Von Ahn)

WASHINGTON, Dec 9 Aetna Inc's chief
executive denied on Friday that its withdrawal from some
Obamacare exchanges was in retaliation for government efforts to
halt its merger with Humana Inc, as he sought to
convince a federal judge to approve the deal.

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